TTB COLAs and Formulas

Changes in Administration and other political shifts can have subtle and, occasionally, not-so-subtle influences in the Alcohol and Tobacco Tax and Trade Bureau (TTB) policies and priorities. In the article, “TTB in a Deregulatory Mood” published by Artisan Spirit, Marc Sorini explores how the Trump Administration’s desire to reduce regulatory burdens on business has already influenced TTB’s regulatory priorities. Particularly, in the most recent “Unified Agenda,” a bi-annual compilation of federal regulatory initiatives, TTB placed a priority on deregulatory projects, several of which would alter the regulatory environment for the industry. Marc discusses how the change in administration appears to have an effect on TTB’s rulemaking efforts.

The Industry Circular also expanded the TTB approved statements under the allowable revision regarding how to best consume or serve the product. For a complete list of approved statements for these new and expanded allowable revisions, please see the full Industry Circular located here.

On February 5, 2018, the US District Court for the Eastern District of Missouri issued an opinion in one of the many false advertising class actions brought against the industry in the past five years.

Penrose v. Buffalo Trace Distillery, E.D. Mo. 4:17-cv-00294-HEA, involves the labeling of Old Charter bourbon. For years, Old Charter sold an 8-year-old version and a 12-year-old version, with their labels very prominently displaying “8” and “12” (respectively) in several places. According to the complaint, in January 2014 Old Charter “8” was re-formulated to use less-aged bourbon, described by the court as “non-age stated” or “NAS” bourbon. The labels, however, continue to prominently display the number “8” in the same manner as the prior label. In addition, while the label previously stated “aged 8 years,” the NAS bourbon’s label states “gently matured for eight seasons.” The court’s opinion catalogues a number of alleged complaints by consumers that they were deceived into purchasing the NAS product on the mistaken belief that the bourbon was still aged for eight years. Significantly, the complaint alleges that the price for Old Charter “8” remained the same after the reformulation. Continue Reading District Court Issues Opinion in Old Charter Bourbon False Advertising Class Action

Early this morning, both houses of Congress approved the “Bipartisan Budget Act of 2018,” complex legislation that includes important modifications to an arcane law known as the “rum cover over,” which is an important revenue source for the Commonwealth of Puerto Rico and the US Virgin Islands (USVI).

The temporary excise tax relief provided to distillers in the 2017 federal tax reform law will not diminish the amount of federal excise tax revenue covered over to the treasuries of Puerto Rico and the USVI. The 2017 tax reform law included a two year reduction in the federal distilled spirits excise tax rate from $13.50 per proof gallon to $2.70 per proof gallon on the first 100,000 proof gallons of distilled spirits, and $13.34 per proof gallon on the next 22,130,000 proof gallons produced by each distillery or each controlled group of distilleries. The 2018 Budget Act treats all rum subject to the rum cover over as if it is subject to the full $13.50 per gallon excise tax rate. Continue Reading Additional Rum Cover Over for Puerto Rico and the US Virgin Islands Approved in 2018 Budget Legislation

Last week in its regular newsletter, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced updates to the Fall edition of the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda). Like other federal agencies, TTB uses the Regulatory Agenda to report on its current rulemaking projects.

In the updated agenda, a few new items have been added, and many expected publication dates of Notices of Proposed Rulemaking (NPRMs), Advanced Notices of Proposed Rulemaking (ANPRMs) and Final Rules have changed. As always, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. Continue Reading TTB Updates to the Semi-Annual Regulatory Agenda

This post does not constitute tax advice. It summarizes changes in alcohol beverage excise tax laws to assist industry members in planning to implement the changes. Excise tax calculations and liability must be determined for each taxpayer based on numerous variables.

The new tax law formerly referred to as the Tax Cuts and Jobs Act of 2017, provides a temporary reduction in alcohol beverage excise taxes for US brewers, winemakers, distillers and beverage importers. Temporary tax relief is available for beer, wine and spirits removed from a US manufacturing facility or released from Custom’s custody after January 1, 2018, and prior to December 31, 2019. Several provisions of the new law will require the Alcohol and Tobacco Tax and Trade Bureau (TTB) to quickly promulgate new regulations. Continue Reading Excise Tax Relief for Breweries, Wineries and Distilleries

In the past three years, TTB has approved an increasing number of certificate of label approvals (“COLA”) for hemp-flavored vodka, from Mill Six’s hemp, white tea and ginger flavored vodka to Olde Imperial Mystic’s hemp infused vodka. Distillers have designed labels with green smoke-like images and psychedelic sixties-style lettering to hint at their cultural connection to marijuana. As more states have legalized recreational cannabis, distillers have been thinking more ambitiously about combining their distilling business with one or more aspects of the emerging marijuana business.

It’s hard to deny that marijuana has a cultural connection with craft beer, or at least with substantial segments of the craft brewing community. Many craft brewers have signaled to their fans that they know a thing or two about the rituals and lingo of marijuana consumption. But with the legalization of recreational cannabis by several states since 2012, many brewers have been thinking more ambitiously about combining their brewing business with one or more aspects of the emerging marijuana business.

On November 7, the US Food and Drug Administration (FDA) published the latest in a series of industry draft guidance documents to help implement menu labeling and nutrient disclosure regulations applicable to chain restaurants (Draft Guidance). FDA guidance documents are advisory in nature and represent the views of the FDA at a given point in time. Accordingly, guidance is subject to change, but is useful for developing a compliance plan for retail establishments covered by the menu labeling regulations. Changes are usually incremental and based on agency experience and input from regulated industry members.

The FDA established a 60-day period for comments on the draft menu labeling and nutrient disclosure guidance. The comment period ends on January 6, 2018.

The current compliance date for menu labeling and nutrient disclosure regulations is May 7, 2018.

Implementation of federal menu labeling and nutrient disclosures by chain restaurants is a study in modern American political and administrative processes. For those who already tried to comply with the formal FDA regulations and prior guidance, an explanatory note about delays in the administrative process appears at the end of this post.

Two sections of the Draft Guidance explicitly address alcohol beverages.

Guidance is offered for beer lists on menus and the discussion has broader application to wine and spirits products and cocktails that are standard menu items on chain restaurant menus.

Sources of nutrient information for beer, wine and spirits are also discussed to provide an alternative to expensive laboratory testing for each brand that a manufacturer offers.

The Draft Guidance also:

Includes several plain-language explanations of key terms in FDA regulations with useful distinctions between regular menu items and season or special items;

Displays a number of graphics designed to assist retailers with standardized formats to communicate calorie content of various foods to consumers and to distinguish menus from marketing materials;

Directs manufacturers and retailers to reliable sources and methods to prepare and display compliant nutrient disclosures; and

Provides information on presentation of mandatory standard menu notices alerting consumers to the federal government’s recommended 2,000 calorie diet and availability of nutritional information for standard menu items upon request to a server or manager at a retail establishment.

The FDA guidance and the formal regulations use subjective terms about legibility (e.g., contrasting, clear and conspicuous). Those terms aim to ensure that information is consumer-friendly, but they could lead to nuisance complaints from regulators. FDA regional personnel and local inspectors under contract with the FDA will monitor compliance with menu labeling regulations. Since chains will, by nature, have locations in multiple jurisdictions, consistency in enforcement poses a challenge to industry and government.

To mitigate regulatory risks, a conservative approach is advisable to mandatory disclosures. All aspects of calorie and nutrient disclosure should be reviewed by counsel or a knowledgeable compliance professional. The review should start with the manner used to ascertain calories and nutrients and continue through preparation and publication of new and easy-to-read menus and nutrient disclosures. While the regulations will inevitably lead to a standardized portion of chain menus, the Draft Guidance does not inhibit traditional point-of-sale marketing materials, graphics and other creative elements in a menu or associated marketing materials.

Why has menu labeling taken so long?

Menu labeling and nutritional disclosure requirements for chain restaurants are mandated by Congress in the Affordable Care Act of 2010 (better known as Obamacare).

A four-year rulemaking process on menu labeling ended with publication of a final rule on December 1, 2014. That rule is unchanged as of November 2017, and is found at 21 CFR 101.11.

A protracted debate occurred over the complexity of the rule and practical issues for food retailers who are responsible for compliance.

In 2015, Congress enacted an appropriations bill, which included a “policy rider” ordering the FDA to not to spend money on implementation and enforcement of the final rule until one-year after publication of a guidance document. Because appropriations bills deal with funding and not substantive policy, Congress provided no additional guidance to the FDA to clarify issues raised in the rulemaking and public controversies surrounding menu labeling.

The FDA published a “final guidance document” on May 5, 2016, with a new compliance date of May 5, 2017. Controversy continued, and the FDA extended the implementation date again to May 7, 2018.

The November 2017 draft FDA guidance document discussed above could be revised again following the 60-day comment period.

The compliance date remains May 7, 2018 unless extended again by the FDA or delayed by additional Congressional action.

Last month the US District Court for the Central District of California issued an order in the Shalikar v. Asahi Beer U.S.A., Inc. false advertising class action case. Like many similar cases, Shalikar alleges that the plaintiffs, as representatives of a purported class of consumers, were deceived into paying more for Asahi beer because they believed the beer was made in Japan when, in fact, the beer sold in the United States was produced in Canada. In the recent order, the court denied Asahi’s motion to dismiss for failure to state a claim (a 12(b)(6) motion).

The Shalikar plaintiffs brought their case under California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law, and also pled common-law claims for breach of implied warranty, fraud, intentional misrepresentation and unjust enrichment. Asahi beer that is sold in the United States is brewed in Canada, and each label states “Brewed and Bottled under Asahi’s Supervision by Molson Canada, Toronto, Canada.” Each label also states “Product of Canada” as required by US customs regulations. Plaintiffs alleged, however, they were deceived into paying more for the product because the labels and packaging use the word “Asahi,” which means “morning sun” in Japanese, and the label and packaging employs Japanese characters in several places. Plaintiffs also produced a survey purporting to show that the beer’s packaging led 86 percent of the respondents to believe that the product was brewed in Japan. Continue Reading Ruling in the Asahi Beer Class Action